The end of the road for OEMs

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In the last few months, two massive switch-ups have called the future of OEMs into question: First, Google bought Motorola — and second, come October 26, Microsoft will sell its first ever home-grown computer: The Surface tablet.

The enormity of these two developments can’t be understated. For almost as long as Microsoft has existed, OEMs have ridden its coattails and made hundreds of billions of dollars in the process. Last year, more than 350 million Windows PCs were sold — all of them produced by OEMs. IBM, which launched the original PC, was buoyed by Microsoft software until it sold out to Lenovo — which is now the second largest PC maker in the world. Compaq and Dell both started their lives as producers of IBM PC clones, running MS-DOS. There are probably hundreds of OEMs that owe their existence to Microsoft’s software.

Android has done the same for smartphones. Samsung, a massive conglomerate with 340,000 employees, derives 60% of its earnings from its mobile division — which in turn stem from the Android-powered Galaxy smartphones. HTC, now one of the world’s largest smartphone makers, was virtually unheard of before Android. All told, once you factor in smaller, regional OEMs, there are probably dozens of companies that owe their existence to Android.

So long, cash cow

It is no surprise, then, that Windows and Android OEMs are rather upset that Microsoft and Google are getting into the hardware game. “We think that Microsoft’s launch of its own-brand products is negative for the whole PC industry,” says Acer. Dell and HP have both abandoned their plans to produce ARM-based Windows RT (8) tablets, presumably because of competition from Microsoft’s Surface. Google is at pains to point out that the Motorola acquisition won’t impact its partnerships with Android OEMs, but as we’ve already seen with the Nexus Q — Google’s first home-made Android-powered device — the situation is a little more complex than that.

You can empathize with the OEMs, though. For decades, these companies have had an incredibly easy ride, producing mediocre, commodity computers, and getting very rich in the process. Now, out of nowhere, the rug has been pulled out from under their feet. The free ride is over, the golden goose has been plucked — they’re forced to innovate, or die.

This is a problem, however, because most OEMs simply aren’t set up to be innovative — they’re manufacturers of commodity goods, rather than desirable, artistic, feel-good products. Over the years a few OEMs have tried to buck the trend — Sony’s $2000 Vaio laptops are a good example — but for some reason, the idea of a posh, sexy Windows machine has never really taken off. I guess it’s kind of like Chevy producing a $100,000 Impala — it might have gold-plated rims and seats upholstered with the tanned skin of Scandinavian virgins, but it’s still an Impala.

Hubris

The OEMs should’ve seen it coming, though. For almost a decade now, Apple has been investing billions of dollars in its Asian supply chain. There is a reason that Apple’s computers look and feel like nothing else on the market: Other companies do not physically possess the equipment or resources to produce anything that even approaches an iPhone or MacBook Pro. Famously, back in November last year, with Intel breathing down their necks, OEMs said they couldn’t produce ultrabooks comparable to the MacBook Air because Apple has a monopoly on the production of unibody chassis.

Why did OEMs get caught with their pants down? A mixture of hubris and lack of foresight. It seems insane now, but five years ago the world thought netbooks were the wave of the future — and then the iPhone happened. After 20 years at the top, smartphones outsold PCs last quarter. Ditto the iPad (which has only been around for two years!), combined with other tablets, are expected to outsell desktop PCs by next year. Apple has the industrial design, supply chain, and fanatical consumer support to pull the market in whichever direction it wants. All OEMs can do is try to keep up — and as we’ve seen, with falling profit margins, crappy non-iOS smartphones and tablets, and shoddy laptops and all-in-one desktops, following in Apple’s shadow is hard.

And now along comes Microsoft. The Redmond company is between a rock and a hard place: Laptop and desktop PC sales have stagnated, and smartphones and tablets are quickly cannibalizing the 95% market share that has always ensured Microsoft’s relevancy. On the one hand, Microsoft owes its existence to the software licenses bought by OEMs — but on the other, if Microsoft doesn’t move quickly, it runs the risk of going down with the Windows ship, obsolesced by Apple, Google, and others.

I’m sure Microsoft would love it if its OEMs could keep up with market trends, but they can’t — and so it falls to Microsoft to produce a tablet that can swing the market back towards Windows; if you can’t beat Apple, join ‘em.

Farewell, OEMs

If the Surface tablet is a success — and with its design, specs, price point, and Microsoft’s marketing dollars, you have to assume it will be — then I think we can say goodbye to the OEM PC market. HP and Dell will live on, selling enterprise hardware and support, but their PC divisions will be shut down — or perhaps sold off to Lenovo. Perhaps Lenovo can subsist at the bottom end of the market, or maybe it too will shut up shop.

This could be a very exciting period for PC owners. Microsoft’s tablet is a first-party device with unified software and hardware — just like an iPad, or a MacBook Pro. You won’t have driver or app compatibility with Surface, because they all have exactly the same hardware inside. Devs will be able to make Metro apps that perfectly utilize the hardware — like Android and iOS — and, if we’re lucky, we might even see the rise of Desktop apps, such as Photoshop, that are specially crafted for the Surface’s touchscreen.

The risk, though, is that Windows 8 might be the last Microsoft operating system that you can install on your own hardware. If the Surface is a huge success, then Microsoft will rightfully plow a lot of resources into its successor. If Surface becomes the predominant PC platform, then why should Microsoft go out of its way to support the thousands of hardware and driver permutations employed by OEMs and DIY computer builders?

As computing becomes ever more mobile and more device-centric, stability and efficiency is key. One of the key reasons for the speed, stability, and power efficiency of the iPhone and iPad is that iOS is specifically tailored to the hardware. Windows 8 might be the fastest and most stable OS that Microsoft has ever developed, but it would be even better if it only worked on the Surface.

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http://pulse.yahoo.com/_V2OMT4S4EBFMCSCYWHEGHUXJRI Jay

OEMs aren’t going away. You are always going to have people that want their computing devices customized to some degree that certainly neither Google, Apple, nor Microsoft would be able to provide, and there will always be a market for them.
You’ve also completely missed the Linux market. And also, who do you think provides most of the server equipment that the internet runs on? Not anybody you’ve mentioned.

http://www.mrseb.co.uk/ Sebastian Anthony

Yep, enterprise stuff will definitely stick around (though you have other players there, like IBM, Sun, etc.) I’m not sure how big Dell and HP are, when it comes to datacenter servers.

(Though, Microsoft could build servers too, I guess…)

I think your argument is kinda similar to ‘the desktop PC will never die!’
I’m not sure if I buy into that or not. Yes, desktop PCs will probably stumble along for quite a few more years — but I think we’ve definitely turned a corner. They’re definitely going to get less important rather than more — I don’t think anyone will dispute that.

It’s all about the next big thing — smartphones, and probably tablets. Microsoft is making its bet — and if it’s right, the desktop OEMs aren’t going to survive for much longer.

Vincent Lalande-Bériault

With all due respect Mr. Anthony,
you are a good writer/journalist, I like reading most of your stuff. But your are lacking the IT Pros vision and experience.

I work in a shop with over 10000 users/desktops/laptops, and our reality, our world, our softwares/applications (not “appz”) is a Microsoft/Linux desktop world.

There is no way, that in the next 10 years, we can get rid of our over 500 softwares (mouse and keyboard driven) taht we support for our employees.

Your line of thinking is of a consumer/home user. I agree that home users ARE changing opinions, buying tablets, replacing theirs desktops with laptops. But at work, they will use the good ol’ PC for a long time.

Unless the numbers of programmers in the world explodes ten fold and reprogram all corporate softwares to be able to run them on tablets or fancy devices…

Btw, English is my second language, I’m proficient in it, but not enough to good deep in argumentation. Sorry for that.

http://www.mrseb.co.uk/ Sebastian Anthony

Hey! Don’t apologise for English being your second language — I’m sure it’s better than my French :)

Yes, I guess I am approaching it from a consumer point of view. But also, consumer tech and business tech have always had an uncomfortable coexistence.

I don’t think that desktop PCs in the workplace will magically disappear — but in a few years, if the Surface does really well, I think there will be enough internal support/pressure for the IT guys to think about deploying tablets, instead of PCs.

The main thing to bear in mind is that, in a couple of years, tablets will have the same power of today’s PCs. Attach a mouse and keyboard to a tablet, and you have a desktop PC (or laptop).

Thanks for taking the time to comment!

http://info-tran.com/ Info Dave

Alan Kay once said, “People who are really serious about software should make their own hardware.” Maybe Microsoft is finally getting serious.

I don’t think Surface is the threat Sebastian makes it out to be. Surface is a design reference, much like the Google Nexus. Microsoft is not expecting to sell a lot of these. Their distribution is limited to Microsoft Stores and limited on-line availability. I think Surface is Microsoft’s way of saying, “We’re tired of the cheap plastic crap loaded with bloatware.”

@google-06bb2e81f2f3c88cf72ba9856fdaa626:disqus no apologies necessary. The key for Microsoft is the ecosystem. Kevin Turner, COO, Microsoft looks at XP as a $12 billion marketing opportunity. Moving you from an Windows XP world to a Windows RT world is not going to be easy.

Nick Smith

Excuse me Info Dave, but MS is the perpetrator of lots of bloatware.
Example MS word. Of which 90% of the features, 90% of the population do not use.
The Windows 8 interface is so retarded that IMHO it will never penetrate the corporate environment much beyond that small group of employees who want toys not computers. Let’s face it most corporates did not want to move from Windows XP as it was sufficient to their needs, and still has a huge prescence.

h4rm0ny

“The Windows 8 interface is so retarded that IMHO it will never penetrate
the corporate environment much beyond that small group of employees who
want toys not computers.”

I’ve been using Windows 8 as my primary OS for over a month now. I’ve actually done metrics on it so I can objectively assees it and with the exception of very few little items such as turning on a VPN, tasks take mostly the same amount of mouse clicks and movements as in Windows 7 and in some cases less.

“Let’s face it most corporates did not want to move from Windows XP as it
was sufficient to their needs, and still has a huge prescence.”

They didn’t want to move from Windows 95 or Win2k much either, but that doesn’t mean they were a superior OSes to XP, it just means that businesses don’t like the costs of rolling out new software or re-training. There is actually some pretty cool stuff in Win8 for business.

Dylan

@disqus_sTfxWPI3QJ:disqus Our company uses pcs windows 8, not as TOYS, but as serious production machines. They are actually more efficiently used than windows 7 once you are used to it (about 1-2 months). Especially when you implement touchscreen devices (even all in ones), our employees are flying on these machines.

Daniel Revas

“The main thing to bear in mind is that, in a couple of years, tablets will have the same power of today’s PCs.”

And the power of PC’s w ill grow in a similar order of magnitude. Nothing in AMD or Intels Roadmap suggests that they would agree with you. As long as Gamers like me will build 8 Core, tri-SLI or Crossfire rigs OC’d into the stratosphere, Desktops will stick around.

dave chisnell

There are some significant niches in the home markets too that aren’t being addressed well. for PC gamers desktops have an overwhelming advantage, and we are nowhere near the theoretical limits of PC graphics. Also things like a full size keyboard, you aren’t typing a thesis on a tablet touch keyboard. If you own a tablet a desktop has a big cost advantage over a notebook, especially as TVs get smarter (My house has already done away with a traditional PC monitor in favor of just having the PC be a channel on the TV with wireless keyboard and mouse).

Nick Smith

Tablets are still consumption devices not production devices. A quick trip OS last week reminded me of this. Typing on a tablet is a pretty crappy experience, you need an external kb at the very least. May as well have a netbook.

http://marcelbrown.com Marcel Brown

Totally depends on which tablet you’re trying to type on. Or as the future progresses, speak into.

There are two key markets that will never drop desktop hardware:
Business – Desktops are cheaper and easier to service, upgrade, and repair for employees who have no need to take their system home. Workstations for high-end work can’t really be dropped to laptop level either.

Enthusiast – Flexibility and upgradeability that can’t be found on mobile platforms.

http://marcelbrown.com Marcel Brown

A few things to note:

Employees are becoming more mobile. Tablets will allow them to continue to evolve in this way.

Tablets are actually cheaper and easier to service, at least with the iPad, as there is no service other than swapping out the device and shipping a malfunctioning one to Apple. With no real software troubleshooting necessary, it definitely is cheaper to support than a Windows PC. Just the lack of viruses alone shrinks IT maintenance costs significantly.

Workstations and enthusiast will be the final holdouts for PCs. However that market is tiny compared to the mass-scale deployment of the PC as we know it today. But that isn’t necessarily a bad thing. As the PC market shifts away from mass-market commodity mentality to niche-market specialization, those who still truly need and want a traditional desktop PC will find that their needs are being better served by manufacturers who care more about their particular needs, instead of the need to make everything as cheaply as possible. Prices will likely start to rise on average for the traditional PC, but those markets really won’t care so much, as they are already used to paying a premium for better performance.

The real question is what is going to be the PC of choice in the post-PC era? Given that the workstation and enthusiast market is going to be a high proportion of creative professionals, there’s a strong chance that the Macintosh may be the PC of choice in the post-PC era. At the very least, it will be a major player.

h4rm0ny

It’s a very good article, but I think that it is flawed because it doesn’t properly examine how Microsoft and the OEMs will respond to changes. MS doesn’t want to push the OEMs out of the market. They have a successful business model as is with the main weakness being that (as you point out), the OEMs just aren’t really competing on the hardware side. All MS needs is for the hardware to become competitive. They don’t *need* anything more, so they wont push for anything more than that *if* pushing further would have negative consequences. And it would. If you were a big player like Acer, Samsung, Asus, whoever, and you saw MS “pulling the rug out from under you” as you correctly put it. Would you shrug and say: “well it was a fun ride” or would you fight back. If you’re answer is anything except the latter, then you are not a board member of a big international company. ;)

How would OEMs fight back? They would take something free that they could half-inch, e.g. Linux, and promote the Hell out of it. If MS went to war with the OEMs, you would see a push to Linux that would make Richard Stallman blush at how partisan it was.

But the OEMs don’t really want to try and create a new market because much as I like Linux (I’ve been using it for over a decade), Apple would take the war as a chance to eat everyone’s lunch.

MS know this. The OEMs know this. The MS entry into hardware is, imo, a wake up call, a whipcrack on the arse, to get the OEMs to up their game. And they should be grateful because without it, their long-term prospects grow ever weaker. MS do not want a war with the OEMs and they do not *need* to do hardware themselves if the OEMs up their game.

If the OEMs don’t play ball, then yes, MS will ramp up production and do more. But if the OEMs kick the ball back, then MS will sit back and drop back out.

Evidence that I see for the above is that MS is doing various things that show the Surface really is just intended as a stick and a reference machine to show off Windows 8. They’re not selling it to re-distributors, they’re only selling it directly. They’re talking about just selling a million or so.

I could be wrong, but the logic above makes a lot of sense to me and if I’ve thought of it then certainly Microsoft have. MS are playing pace-maker. That’s my opinion.

The problem is, I don’t really see the OEMs catching up with Apple. Samsung and Asus are the possible exceptions, but I’m fairly sure that Dell and HP are dead as far as PCs go. It’s possible that Samsung might absorb Dell or HP, I guess.

Apple has such a huge lead that it really takes someone like Microsoft, with its billions of dollars in the bank, to close the gap.

If Microsoft proves that Windows 8 CAN be sexy, then maybe the OEMs will follow in its footsteps.

If Surface is a big success, and the OEMs still don’t kick into gear, then I would be very surprised if MS doesn’t expand Surface’s availability :)

h4rm0ny

“If Surface is a big success, and the OEMs still don’t kick into gear, then I would be very surprised if MS doesn’t expand Surface’s availability :)”

I agree. But we have different views on the liklihood of your leading “if”. As I say, I think you wrote an excellent article here. But it really hinges on the idea that HP, Acer, Samsung, et al. can’t produce equivalent hardware to Apple. I don’t have much experience with Apple products. I know they have a good reputation for hardware. But ultimately they are just Intel x86 devices these days. I find the proposition that no-one but Apple can create a great device hard to believe. You undoubtedly know more about this than I do, but the proposition is so extraordinary to me, that I feel I need greater convincing of it. With respect. A few months from now, we’ll maybe get to see some of what the OEMs are capable of with more and better coming out next year.

http://marcelbrown.com Marcel Brown

Everyone is missing the point! Nothing hinges on hardware OEMs “catching up” to Apple. How many times have you heard Windows fans claiming that Apple’s hardware is no better than PC hardware, just overpriced? To some extent they are right. Yes, Apple’s hardware has some very nice features and quality that outshine most Windows machines. But hardware is maybe 25% of why people are buying up Macintosh computers in growing numbers. When it comes to the iOS devices, perhaps the Retina display is an easily visible differentiator, but other than that, I don’t believe hardware is a significant factor in the popularity of these devices.
It’s the software! It’s the software-hardware integration! It’s the ease-of-use! It’s the quality of the whole package! It’s the apps! To achieve this type of unity, it takes an extremely close-knit development process between the software and hardware units involved. Obviously, Apple has shown that keeping all development under one roof as been extremely successful. This is why Microsoft is now trying the Surface experiment. And while Google is trying to placate their OEMs, the writing is on the wall for them as well.

The problem that both Microsoft and Google have is that in regards to hardware development, they are not in the same league as Apple. They aren’t even close. Their bread and butter is in software. The fact that hardware production requires infrastructure that can’t be developed overnight, these guys are in trouble. Throw in the fact that their software really isn’t in the same league either, and it’s pretty evident who the dominant player in the device market is going to be in The New World of Technology.

Likely, Microsoft and Google will stick around. Microsoft has a lot of money and legacy Microsoft infrastructures will keep them afloat long enough for them to reinvent themselves – probably. Google’s strength in Internet search and cloud services is not truly being challenged. But Apple is synonymous with devices and we all need to prepare ourselves to work in an Apple-dominated world.

Irvel Nduva

Probably not, but from a consumer point of view, the amount of people who want their device to just “work” is way bigger then the ones whi want to customize everything… Apple has got that, and Various other countries are joining the ride…… Probably OEMs are staying mostly for business, but I believe that there is going to be a massive market change for the OEMs….

http://www.facebook.com/dawaco67 David Cowan

no you are wrong, Apple clearly no longer just works. The debacle with their maps and introducing SIri as a beta, shows that they are not impervious to making really big and stupid mistakes. It is a shame that so many Apple fanboys have chosen to drink the Apple Kool Aid. More than a company that makes computes or smartphones, Apple is great at marketing over hyped, over priced devices that have been purchased by people who choose to join the cult of Steve Jobs. Steve Jobs was admittedly a thief of all the technology that Apple has developed. They took the mouse and gui from Zerox Parc. There is nothing original about this company at all.Wake up people. This company is a cult. There garbage is 3 times as much as the same hardware that is sold in windows personal computers and yes Apple sells PC’s too. Personal computers may have evolved into smartphones and tablets, but they are all computers that are meant for personal use.

me987654

This article is nonsense. OEMs aren’t going anywhere. And Apple’s PCs and phones feel and look just like everyone else’s… they just cost more.

Will Mills

I think this will run a circle like every other circle of life that everything goes through. PC desktop was top dog, in another 15 years everything will be mobile device very small like tablet and phone and everything is happy. Another 20 to 30 years later when the Desktop is nothing but a peace of history/myth some company will say “Hey you know what people would love is it they could have a HUGE screen, a full HUGE keyboard, and something that moves a digital arrow around the screen to select thing instead of poking it with your finger.” Then he comes up with a way to dock a mobile device to these new-fangled thing. It becomes all the rage but now screen are bigger and people want more things to run at once because more fits on a screen, and better looking games because of this HUGE screen. But the hardware to support this would never fit into this iddy-bidy mobile device so they will make a larger case less mobile and call it a stationary device……. and so the circle of life continues.

That is what me and my friends have been joking about for a number of years now. I think it started after we took some history class and saw how history repeats itself over and over just with new players each time.

Joel Detrow

Kind of like the old, “If only there were some cord holding this phone to the base so we’d never lose it!”

Simon Blanchet

I’m really “sad” to read this article but I believe that it is possible… It is not only in computers, it is in a lot of other fields too… Computers were the base of the world of today but today, computers are (for a lot of people) pretty much obsolete…

I remember the days of understanding MS-DOS, commands, long lines of text with spaces, backslashes, those times are LONG gone. People (noobs, common users, not people like us on this web site that have a “vast background”) do not care about Windows anymore, shiny Apple got them to use their phones because they look cool, are trendy and they switch them every 3 years.

Tablets are “computers” easy to bring with you if a phone is not enough and it is still very easy to use, minimum brain required. The kids of today changed the complexion of electronic and OEM are not useful to them, hell don’t speak about building a full rig with top end parts, you are labeled a geek with no life, a moron, etc.

Laptops are now getting kicked out like PC, tablets will win the war (with the phones) because people are not interested anymore. People need bling, simplicity, small size, transportability, nothing like a desktop or a laptop. Only some companies will still offer parts to customers but they will get so expensive (less demand) that it will cost us much more $$ to make a big rig…

Sad but true… 10 years and power computing is gone… Crysis 1 was about the most demanding game in the last 5 years… People complained that it was too hard to play, needed “super computers” to play it… $2,000 for a PC is too much for 98% of the population in 2012… $2,000 on a TV is too much…

me987654

Power computing is not going anywhere. Tablets are not remotely close to meeting the needs of many professionals

http://www.facebook.com/people/Oho-Ohno/100003389762992 Oho Ohno

You miss the point, most people never needed a “computer” they needed a smart phone which only now is available. People that NEED computers always will. There is no way I can use 3ds Max on a smart phone or iPad and never will be.

Simon Blanchet

Agree!

Tony_IA

So long as desktop computers are faster than tablets & portables and run existing programs that tablets can’t run, they will continue to exist and be used. There are an awful lot of home and work users that want or require the fastest computers available. Many portables are close or surpassing desktop spec’s, but only for the short term. In six months, they go from top of the line to average – and are not usually upgradeable. So a portable represents a one or two year investment – a desktop can be upgraded in a year at a lower initial price versus a portable – especially in a job where you don’t move around or need a portable device. Maybe windows 8 will change some of that, but honestly, it’s just too soon to tell. Until we see how Surface actually works with existing programs, we won’t know where it fits into things – desktop replacement or just another tablet? Price hits this too, if it’s inexpensive, it will compete with the iPad – but again, unless it’s fast and runs existing software, don’t expect desktops and portables to go away. This just makes Surface a 2nd tablet people will buy, just like they do with the iPad. OEM’s will be fine, until that line between tablet and desktop features even out…

Nick Smith

I just retired my 5 year old laptop. It well and truly met my needs, I was just concerned about it’s age and reliability. You state that there are “an awful lot of home and work users that want or require the fastest computer available”. In my view they may want or desire, but very few have an actual need.
So basically I don;t agree with much of what you said.

Joel Detrow

It’s certainly true that we’re approaching a point where all the computing power and applications that a typical business needs in a workstation will fit in a Surface-sized device.

And could you guys see about adjusting the commenting interface? It’s buggy as anything, at least on Firefox.

Edit: …yeah, see? This was supposed to be a reply to another comment. My, my, my.

http://geek.com/ sal cangeloso

If you are having specific, repeatable problems please email me. sal @ extremetech

The Muss

it’s only 10.6 inch ultrabook+tablet. I don’t think it can beat “normal” laptop at once. OEMs need to sell laptops with microsoft siganture then everyone will be back in track. I’d pay 20 euro more if laptop came without bloatware but with microsoft siganture PCs

Cameron Cole

Many enterprise companies are just now replacing mainframes. Small and mid businesses still run on WinXP. Even game sales are dominated by the PC. The tablet may be a nice bolt on to productivity and an easy way to browse the web but ultimately real work is still done on a PC. Platforms will change but it will take many years to get there.

Besides OEMs have not had it easy. Their margins on hardware sales have become thin competing with each other. Dell, HP, IBM, etc have been making their money on enterprise services not reselling. Look at HTC as they now struggle to compete in the market space they helped create.

The way they show the surface with that stand and the keyboard, it looks just like a laptop, with the exception that you cannot actually put it on your lap.

cptwei

OEMs will never go away. http://tuxmobil.org/laptop_oem.html
See the relation? OEM/ODMs such as Wistron (former manufacturing arm of Acer), Quanta and Compal, whose name is obscure to most of the consumers, build hardware for all the name brands. Sure, the brands may suffer from a potential Microsoft halo device, but the nameless OEMs will continue to rake in their share of money as long as the manufacturing is still outsourced.

sep332

You know the price point for the Surface? do tell…

JDRahman

OEMs will need to work a bit harder now; consolidation will take place and maybe some players will go out of business. But I don’t think this will happen because of Microsoft’s Surface or PCs if they choose to build them. This is already happening because of the global economic climate.

Microsoft has no distribution and support channel. Setting up distribution might be easy, leveraging from its Software relationships. But support takes time and heavy investment. So far, it doesn’t look like MS has taken any steps in this direction. Meaning Enterprise customers won’t take Microsoft seriously. These are customers who take forever to change their IT policies. They tend to think things through and move slowly: Many are still using Windows XP and just now migrating to Windows 7. They won’t buy Microsoft hardware if there is sketchy support. Bear in mind that Microsoft makes most of its money from these guys. Enterprise volume licensing agreements are per user per year. Unfortunately the Surface go to market plan doesn’t include Enterprise.

Consumers are already happy with their iPads and Android tablets. The one area that hasn’t been addressed is the Enterprise where iPad/Android has very limited usability and cannot replace a notebook.

OEMs have all of these channels in place. They will release tablets running Windows 8 (just not Windows RT) and they will sell them cheaper than Microsoft to customers they already have established relationships with.

Unless Microsoft invests heavily and soon, Surface will be another failed MS product. Microsofts only achievement here is distrust with its OEM partners.

http://www.thenetworkgarden.com hypermark

Two comments. One is that unspoken but implied by your article is the fact that increasingly in the post-pc era, software is a greater differentiation point than hardware. Expressing the capabilities of the software requires really good hardware design + integration.

That’s why Apple touts iOS and “there’s an app for that” over how many megapixels the camera has.Software, as Marc Andreessen correctly notes, is eating the world, and TODAY’s hardware OEM doesn’t understand software as anything other than a layer to be abstracted away.Two is that this isn’t the end of OEM’s per se; just the end of OEM’s that lack true software competency. Bubbling under the surface somewhere are hardware OEMs that natively grok software.

Frank Lindsey

There are many different needs for a computer, some are best addressed with a desktop system, some with e-readers, some laptops and some with tablets. But, when desktop systems were the only game in town that’s what people bought. It shouldn’t be a surprise to anyone that the current diversity of harware allows consumers to buy the system that suits their needs and many opt for something other than the desktop PC. But the desktop isn’t going to dissappear and to get really cheap hardware (the biggest sales point, to me anyway, when buying wintel) you need the OEMs. I think the desktop market is just going to scale back to the level that meets the real consumer need. And I think if MicroSoft tries to exclusively lock down manufacture of PC hardware then they’ll sink their own boat.

Dean Roussel

What about printing? Correct me if I’m wrong but I don’t think you can print from phones or tablets.

http://twitter.com/CoreyTamas Joel In Real Life

Yessir. You can.

Nick Smith

Can I just remind people that COBOL died out at least 2 times over the last decade or two. Now go and use a search engine and see how thriving the Cobol community still is. IBM CICS is also alive and well, despite the fact that IBM does not make Mainframes that are used by the average business, it has mostly migrated to midrange computers.
We will all rely upon the operating systems that are descended from CPM, Xenix and DOS and LISA for a lengthy period until we can get away from legacy software and keyboard input.
You can debate about Operating Systems endlessly. But that is the point, when the debate about OS’s goes away we have moved forward.
Analogy: All cars work (basically) in the same manner. You don’t have to retrain and learn how to drive again to go from one manufacturers car to another. (Unless you have only ever driven an automatic and need to drive a manual – but they are getting less common nowadays)

Neoprimal

Not to be rude, but Poppycock.

There will always be a demand for cheap and for variety.

MS, like Apple have no intention of selling products at/near cost and they don’t have nor want the capability to source cheaper, perhaps even questionable supplies. To that end, neither company has or will be able to undercut OEMs, Granted, Apple has completely skirted the issue by locking up their ecosystem. It is not likely that MS would get as lucky if they did the same. Not everyone has $1200/2500 to spend on a laptop or $600+ to spend on a computer.

Despite doomsayers calling this the end of the PC era, it is not so. The end of the PC era will be here when Crysis 3 can run on the Surface or iPad – that my friends, is not right now. There is high demand for heavy punching computers and devices with quad sli and i7+ cpus with 32+ GB of RAM. The closest we’ve come to portable computers even replacing desktops are desktop replacement notebooks which come out heavier than some small/compact desktops.

OEMs will find a way to strive. People keep saying that the iPad has outsold PCs but many don’t technically consider the iPad or Tablets, PCs. They are certainly a type of PC but I argue that tablets need a subset of their own to be counted in and of itself, I vote for “Tablet” as a subset.

Does anyone here own an iPad or tablet and no computer? You can do a whole lot on them, no argument there but they cannot replace the desktop or even notebooks for many people. You can put your iPad on a dock and have a keyboard and mouse and monitor attached and that still wouldn’t replace your desktop or notebook. It just isn’t powerful enough, yet. And yes, as I mentioned it has the potential to do a lot of the things that you want to do on your desktop/notebook, but it doesn’t do everything and it doesn’t do certain things as well as you would/could on a desk/laptop.

The only time OEMs would need to start worrying is if MS started down the Apple path. Closing up their ecosystem and refusing to license Windows. The first sign of this would more than likely be MS selling Notebooks and Desktop systems – even then it would still be a stretch. I don’t ever see MS doing this. They have too much to lose and not enough to gain.

http://marcelbrown.com Marcel Brown

I think when people talk of the “end of the PC era”, most aren’t saying the PC is going to be completely gone. It just won’t be the dominant device that it once was. Just like when the dinosaurs died out, there are still reptiles around. It’s just that mammals are now the the dominant type of animal. Same thing with computers. Mainframes are still around even today. PCs will still be around. But by and large, The New World of Technology will be dominated by mobile devices such as smartphones and tablets, and at this point, all evidence points to Apple being the dominant force in this market for many years to come.

We tech geeks may consider the tablet a “subset”, but the average consumer sees no such distinction, and ultimately, they are what is driving The New World of Technology.

Neoprimal

I agree with 99% of what you’ve said.

I maintain however that for now, PCs can’t be relegated to being dinosaurs or lizards, lol. In maybe a decade or 2 when a handheld (maybe even write or head-worn device) is as powerful, if not more so than our current high end PCs are, then sure. But you can’t really cast doom on OEMs based on something that won’t be happening for the next decade.

The PC-era is very much healthy, and as such so are OEMs. Tablets are an evolution towards mobile computing; one started by netbooks where/when it became obvious that people were looking for cheaper, smaller devices to go mobile with.
Apple jumped on the idea and made them mainstream. There were many tablets before the iPad but they ran either crippled versions of Windows or were sold at notebook+++ prices.

The industry has always been slow to change, but once the change makes sense it happens. There will be a shift in PC usage due to tablets of course, we’re already seeing it. But I doubt that most people who use computers for more than email/surfing would give up their desktop for a tablet. You don’t get the same experience. For the moment, even when you slap a bigger monitor, keyboard and mouse on a tablet, there are going to be things the user won’t be able to do with a power sipping processor. There will always be an ebb and flow to PC shipments, people aren’t going to buy computers yearly and not everyone buys new systems even when it’s time to upgrade.

It is less likely that tablets and iPads are replacing/displacing PC sales as it is likely that people are buying them in addition to already owning PCs – technically what I’m trying to say is, you may buy a PC in 2012 and an iPad/Tablet in 2012 and then an iPad/Tablet again yearly or whenever one you like is released; it doesn’t mean you were going to buy a PC yearly as well but instead chose to buy the iPad/Tablet, it simply means you’re buying the newest Tablet whenever it is released or you want to upgrade. Then by say, 2017 you may be ready to buy a new PC or upgrade your own.

To an analyst, you’d be a part of the percentage of users to:
Buy a PC in 2012 and 2017
Buy a Tablet in 2012, 2013, 2014, 2015, 2016, 2017
So it looks like you’ve replaced or prefer a tablet over PC but the reality is that you upgrade/replace your PC at larger intervals than you would a tablet.
Hopefully this makes sense. This is why I think OEMs are safe and that the PC-Era is very much still here.

http://marcelbrown.com Marcel Brown

I appreciate your well-thought out response. I think we’re basically on the same page. But there is something that you need to understand regarding the PC industry. When companies are built on a business model of large volumes and then those volumes suddenly shrink, not all companies are going to survive. They’ll either fold or leave the market. Just look at HP. Last year they almost left the PC industry. They cited at the time the “tablet effect is real”. The iPhone and iPad have been like a nuclear bomb on the PC industry. The industry had become complacent and Apple caught them with their pants down. The speed in which this has happened in unprecedented in tech history. To say that the PC industry as we know it has 10 years left is very optimistic.

Again, the PC isn’t going to “die”, just as mainframes didn’t die. But look at what happened to companies that were built around the mainframe when the PC shook up the industry in the 80’s and 90’s. Many companies like DEC faded away. Even the biggest of the big, IBM, almost went under. It would be ignoring history to think that the same thing isn’t going to happen to many companies that are built around the PC.

lebohangmatoane

I have been using XP for 6 years now and has been very good for my business,its only now 2012 that i was thinking of switching to win7 and suddenly win8 arises surrounded by many issues and MS tightening grip on OEM.i have already installed win7 on my dell and i was hoping to go some miles with it,at least 5 years.

A QUESTION
Im running a PC shop and doing a lot of repairs/hardware & software completely.Im aware that later next year i wil come across one of those PC/Laps with win8 pre installed and I wonder how far will it allow me to fiddle with in terms of hardware replacements,motherboard,updates,formatting,bios configurations etc.

darlingtonian1

I personally find this a pretty revolting manneristic piece of opinion journalism. We all should be glad, that OEMs mad computing affordable for everybody in the first place. This includes the oh so fashionable Apple fashionistas, which benefit from all sorts of hardware, like monitors, keyboards, general motherboard manufacturing, etc which was made possible by the success and mass production of windows products.

Some ought to be reminded that Windows became so successful, because it was cheap and did the job. Macintoshs were sluggish, offered monitors with 5″ diameter and were prohibitively expensive.

What the world today is concerned, no other operating system, offers such an wide choice of hardware like Windows.You can make it as “sexy” or as cheap and nasty as you wish.

darlingtonian1

Permitting myself another remark about “sexy” computing: an iPod is a sexy piece of hardware, especially the one with 80GB. However, it is not exactly “sexy” to use: It can’t play wma, wmv, ogg, avi, mpeg, ra, ram, mkv, flv, etc. Yes, I know about converters: with lossy formats they happen to reduce the quality further, and converting a movie or DVD into mp4 takes some time.

As the “sexy” has an extremely proprietary system one cannot just load files onto it which one wants to play like onto another harddrive. For that we have to use the iTunes software, which is rubbish and has been designed to get people onto the iTunes website. If Microsoft comes up with something like that, it s a rip off – from Apple of-course, it is pure genius.

http://marcelbrown.com Marcel Brown

The problem with your analysis is that the large majority of people could care less about the multitude of file formats. And while you may not like iTunes, it seems most people don’t have a problem with it. Just like you say we should be glad that OEMs made computing affordable, we should all be glad that Apple’s iPod and iTunes made digital music an affordable reality.

Most people have no interest in esoteric technology details. They are only interested in being able to easily do whatever it is they want to do. It is evident that with the iPod and iTunes, then the iPhone, then the iPad, Apple has nailed the right balance of ease-of-use, reliability, and power that has people buying their products in droves.

We tech geeks need to come to grips with the fact that the Old World of Technology is over. We need to realize that we are no longer the driving force behind mainstream technology. Sure, we will continue to push the envelope of technology and there will always be companies that cater to us – just as there are car enthusiasts and a market that caters to them. However, the large majority of the car market caters to the mainstream, and this is the future of the technology market.

mr215

death of OEM is premature despite MSFT and Google effort to market HW like Apple. OEM will have to find ways to enhance its products to combat above. Linux OS will be improved to gain a bigger share of OS market. PC makers need better laptop quality to compete also with Apple. perhaps too many makers and too may variations (unlike efficient Apple). buyers will benefit from shakeout. the future is full of surprises!

http://www.facebook.com/profile.php?id=100000092715925 Jim Noord

What about Linux? Sounds like a couple of missteps and well, LINUX has a new brighter future ahead! Low cost hardware and a free OS, what is not to like.

gda000

IBM did not invent the PC. It only packaged what was already being used in the marketplace and managed to garner the world’s attention by putting its Big Blue logo on the box. There were other personal computers in the marketplace at the time. The term IBM PC is inappropriate for a WinTel device.

http://profile.yahoo.com/DXDLO7S7JZHBSXOBOAYWL6HOT4 AlanH

Windows Clones may go away, but in many ways they already have. OEM manufacturers have gone down in numbers to about 6 with any quality or volume, but this is a great opportunity for Linux on the Wintel platform. Just needs marketing……..

spigzone

“- but for some reason, the idea of a posh, sexy Windows machine has never really taken off.”

yeah, real puzzler … microsoft customers have hundreds of models to choose from = price is critical for manufacturers and the primary selling point, apple customers have a handful of models to choose from = posh sexy machines and software are the selling point and price less critical.

http://mdude1350.livejournal.com/ MDude1350

Sounds to me like this could be an opportunity for the development of ReactOS. It’s designed to be binary-compatible with Windows, in what from what I can tell is a fairly methodical and thorough manner, and OEMs can’t be prevented from using whatever version they want, or even customizing the system rather extensively for their own machines. On the other hand, with the way head-mounted displays are coming along recently, maybe desktops and touchscreens will both take a hit in favor of wearables.

fd34tg

What do tablets and smartphones have to do with computers? Find me just ONE person that exclusively uses the former 2. Neither a smartphone nor a tablet can really replace a PC (both laptops and/or desktops) fully. Gaming, production (ex. spreadsheets, extensive writing, programming — need powerful hardware to compile quickly),etc all demand you use a REAL computer. I do not deny that smartphones and tablets are useful, however they lack many functions and thus can NEVER fully replace PCs.

http://marcelbrown.com Marcel Brown

I have many clients that have switched to only using their iPad for their home computing needs. Most of them have iPhones too. For what they need and want to do, the iPad and iPhone are complete solutions. Not everyone needs or wants to run 3D games, create spreadsheets, or write software. A lot of people primarily use the Internet and find plenty of productivity with the multitude of apps available.

http://www.facebook.com/dawaco67 David Cowan

i disagree. OEM’s are not going anywhere. I prefer my desktop over any smartphone, tablet or idevice. The author of this article is obviously uniformed and a total Apple fanboy.

Jeff Jones

This article is analogous to the “all cars are doomed because the SUV market is exploding”.

The full sized PC market will not die and the really big OEMs will eventually get their manufacturing chains worked out for tablets. Additionally, the first company to build a nice tablet with the ability to install to Windows, Android, Firefox OS, or any future options will sell plenty over it’s locked down competition. Asus is coming close.

Alternatively as technology progresses to flexible lighter screens and smaller batteries, it’s possible that the 3D printer technology will get good enough and simple enough over the next ten to twenty years that anyone could customize and build their own tablet with minimal effort.

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